Christopher Mooney: Back to square one for Illinois pension reform

You may not have noticed, but on Thursday the Illinois Supreme Court dealt a body blow to the state’s body politic.

The case was Kanerva v. Weems, and it will have a major impact on the state’s finances for a generation. As such, it should also have a major impact on the fall’s gubernatorial campaign debates.

Decades of underfunding and overpromising by state policymakers has threatened the solvency of Illinois’s state public pension systems. It is underfunded by probably more than $100 billion.

That’s a big number — by far the biggest in the nation. It is approximately enough money to operate the entire state government — prisons, parks, state police and everything else — for three years.

Public pension debt contributed heavily to the recent bankruptcy of Detroit and other local governments, so policymakers and bond rating agencies that determine how much the state pays to borrow money for new roads, bridges, and schools are very concerned with this.

But as Bruce Springsteen once wrote, this is “a debt that no honest man can pay.”

In 2012 and 2013, after much political angst and drama, the General Assembly and Gov. Pat Quinn adopted two measures designed to address the problem. To simplify, they eliminated free health insurance for retirees, and they made major changes in the retirees’ annuity payouts.

They argued that these reforms solved the pension problem, and Quinn touted pension reform as one of the central accomplishments of his administration.

The only problem was the Illinois State Constitution. And in Kanerva v. Weems, the Illinois Supreme Court just reminded the governor and General Assembly of that.

Article VIII, section 5 of the State Constitution states that: “Membership in any pension or retirement system of the State…shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Didn’t the two pension reform bills effectively “diminish or impair” pension benefits? A commonsense answer from reading this section would be, “Yes.” But the General Assembly and governor pushed a different reading.

It was up to the State Supreme Court to say the emperor had no clothes.

Kanerva v. Weems dealt with the more minor of the pension reforms — making retirees pay health insurance premiums. Policymakers argued that certainly this was somehow separable from “pension benefits” to the extent that the court would allow it to be cut, even if it disallowed cuts to the annuities.

In fact, the argument was made that if the court threw out the annuity changes, these premiums might be to barter with retirees for other cuts.

The Supreme Court had different ideas. They read the Article XIII, section 5 plainly, taking the words at face value. No impairment, no diminishment. Health insurance is a benefit in the contract with retirees, and it can’t be reduced. Period. Just because it is politically or financially hard to fulfill that contract does not eliminate the state’s obligation to do so.

Kanerva v. Weems sends the governor and the General Assembly back to square one on dealing with the public pension issue. What can be done about it? This is exactly the sort of major policy question that the gubernatorial candidates should be debating this fall.

Voters and the media have the responsibility to demand that candidates articulate clear and feasible strategies for dealing with this major problem. Voters can then make their choice of strategy at the ballot box in November.

Christopher Z. Mooney is director of the Institute of Government and Public Affairs at the University of Illinois.